Culture Integration By P. Murphy

Culture Integration Integrating M&A

By PATRICE MURPHY

Pleasing the In-Laws

You have to feel sorry for the men and women charged with making mergers work. Knowing that the majority of mergers and acquisitions are doomed to never deliver on the promised shareholder benefit, the job of planning and implementing the integration is not for the faint of heart.

When corporations tie the knot across international boundaries, the challenge gets even harder. Employees, for example, are further apart, often separated by barriers of language, geography and inconvenient time differences. They may also be surprised by each others’ expectations of organizational life and different ways of making decisions, communicating, modeling leadership, or showing loyalty. With these challenges, misunderstandings can lurk behind the corner.

COMPREHENDING CULTURAL DIFFERENCES

Differences among national cultures have been studied by academics for decades. People living and working in different countries can react to the same situation in very different ways. For example, why behavior that is considered to be decisive leadership in one culture can appear overbearing and insensitive in another. Such differences in interpretation – and the divergent feelings that result – can be fatal to successful post-merger integration. But the opposite is also true. Cross-cultural differences can actually be leveraged as a source of competitive advantage in shaping organizations. For example, back in 2008 HSBC showcased its appreciation of cultural differences in its Different Values global marketing campaign, positioning itself as the worldwide local bank. That year, anyone traveling through a major international airport probably saw a poster with the words “style,” “soldier,” and “survivor” overlaying three identical photos of the back of a gender-neutral shaved head. The bank’s provocative photo-triptychs continue to explore differences in how people interpret and value objects, behaviors and symbols – communicating HSBC’s premise that different values make the world a richer place.

BE AWARE

OF POTENTIAL OBSTACLES

To prepare for success, integration leaders can be armed with an awareness of some common traps that afflict international M&A:

•Cultural myopia – Ignoring the important role that national and regional culture can play in shaping corporate culture. US companies can be particularly vulnerable to this mistake, since the language, concepts and assumptions of modern business have been heavily influenced by the teachings of US business schools and the practices of US corporations. Understanding how one’s own business practices are based in various cultural assumptions opens the door to appreciating other points of view and being sufficiently adaptable.

•Leadership styles – Misunderstanding both leadership styles and how people respond to leaders. Differences in “power distance,” as it is called in academic literature, help explain expectations of how a good leader should behave, the willingness to speak up and openly question authority figures, and notions of the right response to autonomy. Leaders who have been immensely successful in one culture can find themselves dismissed or even reviled in other cultures because of low awareness of how leader behaviors will be received.

•Customer misunderstanding – Failing to recognize the insights that local employees can provide about customer needs. Even among global behemoths like Coca-Cola, there is seldom one consistent approach that works perfectly in every country. Employees are usually the best, first source of advice on how to adapt a firm’s product or service, marketing, distribution or after sale service.

STEPS FOR EASING INTO CHANGE

There are three things leaders can do to ensure success starting on “day one” of the newly-combined organization. First, integration leaders should explicitly address cultural differences in framing an international vision for the new organization. Often, cross-border acquisitions are intended to build a distinctly global capability by allying the acquirer’s strengths in production, marketing or distribution with local expertise in serving key growth markets. In this scenario, local cultural insight is an asset to be respected and valued. Shaping a culturally-inclusive vision for the combined organization starts with taking the time to listen, learn and understand the cultural differences that will come up. When US-based pharmaceutical company Shering-Plough announced its acquisition of the Dutch company Organon Biosciences, integration planning started six months before the deal close. The first step was a three-day session in Amsterdam, bringing together senior executives from across the two companies with an explicit “listen and learn” agenda. Leaders then began a program of mutual visits to learn about each other’s culture. Within weeks, executives of both companies were sharing a vision for the merged enterprise that emphasized their common, science-based culture, lauded areas of distinct capability and emphasized the desire to knit these to-

gether in a global corporation capable of achieving more than the sum of its parts.

FOCUS ON

INTEGRATION PLANNING

An integration leader’s second step should be to bring representatives from different cultural perspectives into the integration planning team. This aligns with the best practice of including representatives of both the acquirer and the acquired on the planning group, as well as spanning the major business units and functions. The pressure to drive integration planning at a rapid pace might make a less diverse team tempting – but you will ultimately be better off having representatives who understand the values, assumptions and taboos of employees in countries outside the main office. Years ago when GE Lighting acquired Tungsram, a previously state-owned company based in Hungary, the cultural differences between the hard-driving Americans and their new colleagues who had lived for years under communism could not have been more stark. GE appointed a Hungarian national from another part of its business to head up the integration planning. Returning after 20 years of exile from Hungary, he understood the language, culture, history and recent travails of his compatriots – and his presence sent a strong signal about the potential for Tungsram employees to succeed within GE.

IDENTIFY A CULTURE-SPANNING LEADER Finally, it is important to have a senior leader onsite in key locations, able to play a “culture-spanning” role. This person should have sufficient time onsite to get to know the local business issues, leaders, culture, and “hot buttons.” He or she should have the authority to address problems or misunderstandings before they escalate – proactively identifying actions or communications that could be misunderstood or have unintended consequences. With care, the integration of cross-border mergers and acquisitions can be a success that equals or beats the odds.•